Data caps claim a victim: Netflix cuts streaming video quality

In response to widespread data caps by Canadian ISPs, Netflix has cut the …

Netflix announced last night that Canadian users will, by default, receive lower-quality—and lower-bandwidth—streaming video. The change was made to protect users, "because many Canadian Internet service providers unfortunately enforce monthly caps on the total amount of data consumed."

Fast Internet connections could previously chew through 30-70GB of data while streaming 30 hours of Netflix video in a month. Data caps for the Rogers cable operator and for Bell Canada start at 2GB per month; cable operator Shaw starts at 15GB.

Faced with the prospect of users thinking twice before streaming anything on Netflix, the company has decided to put Canadians into a default "Good" streaming tier that will transfer only 625Kbps (which works out to 0.3GB per hour), using up 9GB a month if someone watches 30 hours of Netflix. The move is designed to keep users from exceeding their caps by accident.

The company admits that "there is some lessening of picture quality with these new settings" but insists that "the experience continues to be great." Customers can manually switch their accounts to two higher levels of service, "Better" (0.7GB per hour) and "Best" (1GB per hour with standard definition content, 2.3GB per hour for HD content).

The Netflix e-mail announcement to Canadian subscribers

Netflix will continue to use adaptive streaming, which reduces the stream bit-rate in cases of congestion or low-speed connections, but this is the first time Netflix is purposely dialing back video quality and size for connections perfectly capable of handling the larger streams.

The major Canadian ISPs—Shaw, Rogers, and Bell Canada—all offer separate pay-TV services of their own. Netflix has offered its own streaming service in Canada for only eight months, and ISPs like Rogers welcomed Netflix to the country by lowering the data caps on some tiers. (One lower-priced tier dropped from 25GB to 15GB.)

170 Reader Comments

this is fucking horseshit. I pay for an unlimited business account with Videotron since I work at home. Hey Netflix – I'm looking forward to my bill being 2/3 cheaper.

Quote:

Socialism for the loose.

wtf? This isn't socialism, dude. If it was socialism, ISPs would be forced to all cater to equal public quality. It's the opposite of what's happening: corporate collusion and a lack of pro-consumer policy.

And learn how to spell, loser.

You make a good point. It's a lose-lose for customers. You get data-capped. Then NetFlix "takes pity on you" by lowering the quality of your streaming...but still charges you the same (?). That's a whole new level of "suck" right there.

What, did you think the rights-holders of the movies care what the quality is to give Netflix a break to pass on?

I am Elise, I work with Rogers. I wanted to stress that we welcome competition and Netflix to Canada.

The fact that we announced some changes to our Internet packages just a few days after Netflix announced it was launching in Canada was completely unrelated. At the time, we only made changes to 2 packages among 6 in total. We reduced the usage allowance on our Lite and Extreme packages but also improved dowloading speeds, and the changes only affected new customers.

And, by the way, if our Ultra-Lite package starts at 2GB, our largest package is 175GB. Lots of movies to stream

I understand what you're trying to say and I think we're all-in, "don't have artificial restrictions".

With that out of the way, the problem here is not government, nor CRTC. In fact it's the opposite. ISPs are free to place any restriction they want, charge what they want. The only major restriction that was ever made was that the government retained ownership of the wires under the streets and forced ISPs to be able to resell pipes to smaller ISPs at bulk discount rates. Since most of these small ISPs are out of business, they can pretty much hose consumers.

Ironically, the Canadian government and CRTC need to step in and be more involved to protect consumers and foster competition inside homes. They need to be pushed into opening up their systems, driving down costs. For example, cable companies don't support CableCARD standards like Comcast is forced to. This is preventing Tivo or WMC from being adopted as set top boxes as they were meant to.

"All of that cost is basically nothing compared to the last mile cost directly to the home."

What?! Hardly. Using copper for the last mile is the CHEAPEST part of the whole deal...even with the massive scale of running it (digging it/hanging it). The problem is getting ACCESS in the right of ways. The most expensive part is PAYING these franchise fees and the cost of putting a shovel in the ground and digging 4 feet - 6 feet is nothing compared to dealing with the metro politics. Things *can* get tricky and costly for paved roads (in the ways etc) but there are poles for those areas (even cheaper than digging) EXPECT to put poles up costs you not in the actual materials (majority) in labor but FEEs from the cities and their franchises. Not to mention cities almost always deny new poles going up.

The problems with right of ways from the city/metros are the problem. They create barriers (in money and monopoly) to these areas. Want to know how many times your metro city politics reject right of way improvements in these areas? Inquire. Last year alone Time Warner was rejected from expanding their fiber network over a dozen times due to city politics.

Companies treat right of ways like gold because they ARE! Why let someone else bury with you when you spent all your time in paying and BEGGING the city to allow you (not to mention you more than likely got denied many times before).

Quit this crap of franchise fees and protection of right ways with politics and you can see huge improvements.

"All of that cost is basically nothing compared to the last mile cost directly to the home."

What?! Hardly. Using copper for the last mile is the CHEAPEST part of the whole deal...even with the massive scale of running it (digging it/hanging it). The problem is getting ACCESS in the right of ways. The most expensive part is PAYING these franchise fees and the cost of putting a shovel in the ground and digging 4 feet - 6 feet is nothing compared to dealing with the metro politics. Things *can* get tricky and costly for paved roads (in the ways etc) but there are poles for those areas (even cheaper than digging) EXPECT to put poles up costs you not in the actual materials (majority) in labor but FEEs from the cities and their franchises. Not to mention cities almost always deny new poles going up.

The problems with right of ways from the city/metros are the problem. They create barriers (in money and monopoly) to these areas. Want to know how many times your metro city politics reject right of way improvements in these areas? Inquire. Last year alone Time Warner was rejected from expanding their fiber network over a dozen times due to city politics.

Companies treat right of ways like gold because they ARE! Why let someone else bury with you when you spent all your time in paying and BEGGING the city to allow you (not to mention you more than likely got denied many times before).

Quit this crap of franchise fees and protection of right ways with politics and you can see huge improvements.

Franchise fees are limited by federal law to be no more than 5% of an ISPs revenue. With typical profit margins of less then ten percent, this means that franchise fees are legally capped at about 5.5% of total costs (and it's a cost that they are legally allowed to pass directly on to consumers as a line item on bills). Explain how that could possibly be the dominant cost (that's even forgetting that customers pay it directly anyway)? I guess the other 94.5% of costs are just imaginary? Do you have some credible information about how these franchise fees are actually destroying competition? Or any information about how these fees are anyway different than normal business licensing fees that all businesses deal with? I just read a report from the Cato institute saying the same thing, but even they had to admit that franchise agreements are almost always non-exclusive but that "other things" about the arrangements ensured monopoly status to individual ISPs. Also, like you, they provided exactly zero information about what these "other things" are, how they factor into cost and liability breakdowns with credible sources of information about these nebulous "circumstances". It's really easy say that it's big government and their fees and taxes that are killing competition. Where's your data? I believe you when you say you've been under the streets to see the infrastructure yourself, but unless you found a stack of receipts and ledgers down there too, most of what you said is just hearsay.

EDIT: http://www.fcc.gov/Bureaus/Cable/News_R ... b0201.htmlFranchise fees aren't even applied to the internet component of cable operations, only to the television broadcast component. So as far as ISP competition, franchise fees haven't been an issue at all since 2002.

The franchise fees are NOT my main concern or that of cable/telcom operators. However ACCESS to that cost is what I am concerned most with. "Paying" them was a way for me to show "winning" access. In order to pay them other things MUST happen...and that's were it get's dirty. Kick backs such as wiring schools, providing close circuit tv (millions to public access broadcasting) community/schools and providing multi million dollar studios for those communities is another "cost" that is fished out of the Cable companies once they HAVE access to the franchise fees. Austin area High Schools have their own "broadcasting" on-site with CCTV provided by Time Warner Cable. Well most of them. Last I heard about 80 percent do.

All this to sweeten the deal in order to get access to the franchise. In addition telecom made to provide cut rate deals (hid away as discounts for "Bulk Volume") to certain customers within the community (city hall, non-profits and other city "related" services). Not to mention public event non-mandatory sponsoring but "sweeting" the franchise deal (ie Movies in the Park, Austin TX) It's not the fees per say but the franchise access itself. Paying them in a sense IS hard..because of the other things cable companies have to do WIN the franchise away from Time Warner and the City of Austin (for example). Who can afford to continue all these sweet heart deals Time Warner does?

Most cities even have thought to drop franchises due to the NON-SPONSORING events such as "marathons" according to those that lost their franchise. This according to some employees of those cable companies.

If the franchise fee was just "renting" the public right of ways (as cities claim)...then it would be okay to allow that rent to be collected from more than just one telecom/cable operator. Heck more money for the City. Since in most cases it's not then the franchise fee alone is the "prize" in which a monopoly wants to earn (along with the right away).

So in short if things work better out side metro area (IE, telecom working with each other and paying the costs of digging new lines, installing, linking, bonding etc)...what makes INSIDE the metro different? Working in the industry and working closely with telecom (metro Ethernet hookups) I can honestly say working WITH each other is not the issue (in which metro ethernet you can use up to 3 different providers going across town).

EDIT: Also 5.5 percent (the actual percentage allowed) is MILLIONS a year. As you said with such low profit margins this is indeed a big issue and adding 5.5 to customer's bills is a lot to some (10 bucks a month...Netflix anyone?). Just another hurdle.... let alone the "sweet heart" deals cities get for granting franchises.

The franchise fees are NOT my main concern or that of cable/telcom operators. However ACCESS to that cost is what I am concerned most with. "Paying" them was a way for me to show "winning" access. In order to pay them other things MUST happen...and that's were it get's dirty. Kick backs such as wiring schools, providing close circuit tv (millions to public access broadcasting) community/schools and providing multi million dollar studios for those communities is another "cost" that is fished out of the Cable companies once they HAVE access to the franchise fees. Austin area High Schools have their own "broadcasting" on-site with CCTV provided by Time Warner Cable. Well most of them. Last I heard about 80 percent do.

All this to sweeten the deal in order to get access to the franchise. In addition telecom made to provide cut rate deals (hid away as discounts for "Bulk Volume") to certain customers within the community (city hall, non-profits and other city "related" services). Not to mention public event non-mandatory sponsoring but "sweeting" the franchise deal (ie Movies in the Park, Austin TX) It's not the fees per say but the franchise access itself. Paying them in a sense IS hard..because of the other things cable companies have to do WIN the franchise away from Time Warner and the City of Austin (for example). Who can afford to continue all these sweet heart deals Time Warner does?

Most cities even have thought to drop franchises due to the NON-SPONSORING events such as "marathons" according to those that lost their franchise. This according to some employees of those cable companies.

If the franchise fee was just "renting" the public right of ways (as cities claim)...then it would be okay to allow that rent to be collected from more than just one telecom/cable operator. Heck more money for the City. Since in most cases it's not then the franchise fee alone is the "prize" in which a monopoly wants to earn (along with the right away).

So in short if things work better out side metro area (IE, telecom working with each other and paying the costs of digging new lines, installing, linking, bonding etc)...what makes INSIDE the metro different? Working in the industry and working closely with telecom (metro Ethernet hookups) I can honestly say working WITH each other is not the issue (in which metro ethernet you can use up to 3 different providers going across town).

EDIT: Also 5.5 percent (the actual percentage allowed) is MILLIONS a year. As you said with such low profit margins this is indeed a big issue and adding 5.5 to customer's bills is a lot to some (10 bucks a month...Netflix anyone?). Just another hurdle.... let alone the "sweet heart" deals cities get for granting franchises.

This is just more anecdotes. Where is this data coming from? If all this stuff was really the "majority" of an ISP costs as you yourself said, where's the paper trail? You've provided no actual reason to believe that any of these things are actually happening, or that if they are they represent the majority of an ISPs costs. These are just nice stories without some factual backing and some fact based cost breakdowns that show that a serious impact on the costs of running an ISP. And the fact that 5.5% is millions of dollars works the other way too. That means their revenues are more than 20 times larger than that. The 5% is only on the television based portion anyway, so since this discussion has been about internet economics, it's been irrelevant for the past nine years and irrelevant in this thread. I don't doubt that politicians make shady deals. But if you want to claim that shady deals are so endemic that they represent the "majority" of costs for ISPs pretty much everywhere in the country, you're going to have to do better than a couple of anecdotes.

I gave you REAL examples of kick backs. You can inquire about those (in Austin, TX) by calling the City Hall (512 -974-2000 ). They don't post links on the web for every kick back. Deal with it. Believe it or not because I don't "link" anything doesn't mean it isn't happening. I live in Austin and work directly in the industry. I visit schools and seen the kick backs with my own eyes. I have seen the multi-million dollar studios given to the city (for public access) and even the renting of their own Studios (now called YNN) to city officials and purposes at almost no cost. Free cable for local schools (yes even TV) and Internet access at 10 percent of market cost. I also deal and appear in City Hall to debate the franchise renting of lines. Not to mention that almost 8 out of 10 high schools have their own CCTV and broadcasting studios "donated" by Time Warner cable.

You still can't answer me if they are just renting the right of ways...why not let anyone who wants (with Secured Bonds) rent those same areas? Answer....they want the kick backs.

I gave you REAL examples of kick backs. You can inquire about those (in Austin, TX) by calling the City Hall (512 -974-2000 ). They don't post links on the web for every kick back. Deal with it. Believe it or not because I don't "link" anything doesn't mean it isn't happening. I live in Austin and work directly in the industry. I visit schools and seen the kick backs with my own eyes. I have seen the multi-million dollar studios given to the city (for public access) and even the renting of their own Studios (now called YNN) to city officials and purposes at almost no cost. Free cable for local schools (yes even TV) and Internet access at 10 percent of market cost. I also deal and appear in City Hall to debate the franchise renting of lines. Not to mention that almost 8 out of 10 high schools have their own CCTV and broadcasting studios "donated" by Time Warner cable.

You still can't answer me if they are just renting the right of ways...why not let anyone who wants (with Secured Bonds) rent those same areas? Answer....they want the kick backs.

You didn't get the point of my post. It doesn't MATTER if your example is real. A couple millions dollars doesn't come close to being the major cost of running an ISP. Even if every single thing you said about kickbacks in Austin was 100% true, it STILL wouldn't mean that fees and kickbacks represent the majority of costs of running an ISP. You are the one who made claims well beyond what your own evidence supports. A few million dollars isn't a large portion of a couple hundred million dollars. And as far as renting rights of way, they already DO let anyone who wants to rent them in most cities. The reason why nobody else does is because of the cost of laying redundant cable. YOU are the one claiming some government kickback conspiracy is preventing competition. I'm relying on publicly stated municipal regulations and fee structures and you are speculating based on your personal experiences. The burden of proof is on you. It doesn't even matter if cities routinely request public services from franchise licensees, you claimed these things added up to the majority of costs and that's bullshit. Once again, you are going to have to do better than unsubstantiated claims about a single city which even if true wouldn't support your original claims anyway.

Wow, just wow. You have this notion that city officials actually DO allow the public to lay the cables if say company B came along. THEY DON'T! In a lot of cases (almost 99 percent) wining the franchise for the telcom/cable provider ENSURES no immediate competition for the duration of the "lease" and many years even after the expiration of the franchise.

"majority of costs and that's bullshit. " No my point was that its another "millions" added to yet a tough market thus creating YET ANOTHER barrier to entry with costs AND POLITICS. Sorry not "yelling" just typing on a phone that can't use the bold, formatting, etc. There is no reason why telecom/cable providers have to go through the "approval" stages from politicians if they pay the bonds and fees (with a reputation of installing lines correctly).

In fact, Grande Communications in Austin are allowed to lay cable in CERTAIN areas of Austin only (State actually had to sue Austin). Downtown (east of Lamar) is OFF limits because of the agreement made with Time Warner Cable ensures Grande can't lay their own cable. The State awarded Grande the areas in which they can lay their own lines in areas of Austin (where the state lays it's public utilities or digs up a road). This was an effort by the State to minimize these franchise barriers created by cities. Austin could have TWO cable operators for 100 percent of their city however they won't allow the Grande to lay lines.

SO again...if it was just renting the right of ways....then anyone could inquire and lay lines. You also have this notion that kick backs in the millions of dollars (that are NOT required by the franchise agreements) don't affect the decision of a city official(s) in to WHOM they allow their franchise to go to AND the number greater than 1.

There should BE NO reason why multiple franchises can't be granted to telecom and cable providers.

NYC has two franchises...(only two and NOT to exceed that number) and just look at what they are requiring their cable providers to do. Look at those barriers and politics. Not one enterprising young person whould EVER think about starting an ISP within cities like this. If they are it's likely wireless....and you can see examples of franchise winners suing the city for allowing these wireless providers or having the city create new laws to limit WISPs..